The item that has probably been
a larger sticking point is not the price component, it is the ability for
Chinese importers to execute.

·Rollback of Chinese Pork Tariffs Good News for U.S. Producers
and Chinese Consumers

… Jim Monroe, the Senior
Director of Communications with the National Pork Producers Council, says the
Chinese tariffs have resulted in an estimated loss to American pork producers
of eight dollars per hog sold in the U.S. so, if the Chinese media reports are
accurate, it's a most welcome development…

Is this time for real?

The item that has probably been a larger sticking point
is not the price component, it is the ability for Chinese importers to execute.

Joseph Kerns, National Hog Farmer

Sep 16, 2019

The recent rally in hog futures on the back of optimism
of the U.S.-Chinese relationship may feel like another round of Lucy promising
not to pull the ball out as Charlie Brown attempts a kick. We have been here
before only to be disappointed on the backside of a rally to “The Promised
Land.” I believe there is a reason to embrace the hope and also remain aware of
the current reality.

Let’s first consider what is in front of us. The October
contract is under pressure, trading at a plus-$3 discount to the December — an
abnormal situation as October usually trades at a premium to the December
contract. This is reflective of the heavy economics on the front end in
relationship to the hope for the deferred contracts. This scenario — reality in
the moment and anticipation of the future — is going to be a common theme; the
question for pork producers is “what do I do?” We are likely going to have to
slog through the next few weeks of heavy markets as animal flow and
productivity appear to be stellar. I suspect we will get confirmation of the
good production on the Hogs and Pigs Report at the end of this month, 2 p.m.
Chicago time on Sept. 27. Packer margins are healthy, to say the least, which
will keep animals moving even if we are not thrilled with the values received.
The hope is largely structured into the 2020 contracts with our models
indicating a plus-$30 margin for pork producers. Is it too good to be true? In
my opinion, the forward curve is “properly” valued given the considerations:

·China has been both booking and taking delivery of product in a
relatively steady fashion since the first of the year. The market is pricing in
both the current shipments continuing and increasing as we roll forward — this
appears to be a sane assumption. Steve Meyer’s economic work would indicate
each 1% diversion of available supply equates to roughly $6 per carcass per
hundredweight of price change. China taking 2% extrapolates into about $12 of
price premium, Steve’s model indicates a mid-$70s summer market in the absence
of China — the math works in the $90 summer of 2020 price point. Bottom Line —
we are not too far out in front of our skis given these data.

·Prices in China are approaching $30 RMB/Ki. That number needs some
context given that we generally do not relate to those values or easily convert
them in our head. To put it in perspective, this is the equivalent of roughly
$2.40 per pound carcass in U.S. terms. Do you think there may be some financial
incentive here? Yep.

·There
is a difference between a tariff and an embargo. We have largely been focused
on the application of ever-increasing tariff levels and how pork has been
caught as a bargaining chip in international negotiations. That is probably the
wrong metric in this market as evidenced by the previous bullet point that
shows a massive economic incentive, even with the tariffs in place. The item
that has probably been a larger sticking point is not the price component, it
is the ability for Chinese importers to execute. This is where the log jam
appears to be moving and will allow the monetary calculations to manifest.
Please watch this item as your harbinger of product movement, not the tariff
level.

Rollback of Chinese Pork Tariffs Good News for U.S.
Producers and Chinese Consumers

Jim Monroe - National Pork Producers Council

Farmscape for September 17, 2019

The National Pork Producers Council says word that China
is rolling back retaliatory tariffs on U.S. pork is good news for U.S. pork
producers and Chinese consumers.

Over the past year the U.S. trade dispute with China has
resulted in a build up of Chinese retaliatory tariffs on U.S. pork which hit 60
percent on September 1st on top of the existing 12 percent duty.

Last week, it was reported that China is rolling back its
tariffs on U.S. Pork and U.S. soybeans.

Jim Monroe, the Senior Director of Communications with
the National Pork Producers Council, says the Chinese tariffs have resulted in
an estimated loss to American pork producers of eight dollars per hog sold in
the U.S. so, if the Chinese media reports are accurate, it's a most welcome
development.

Clip-Jim Monroe-National Pork Producers Council:

China has been struggling with
African Swine Fever since August of last year.

It's decimated their domestic
herd, their domestic production has seen serious declines, you're starting to
see reports of pork prices for consumers rising significantly and pork is a
staple of the Chinese diet.

China has always been an
important export market for U.S. producers, usually in the top five of export
markets.

It's even more important now
that they're dealing with African Swine Fever.

It represents a historic
opportunity to increase exports to China at a time when they really need it and
when Chinese consumers really need more supplies.

We're hopeful that we can
compete more effectively for that opportunity and we'll see what happens as we
move forward.